Major Flooding Disrupts Chinese Hydro Power, Bitcoin Mining

Waves of heavy rainfall in China’s Sichuan province have caused major flooding, significantly affecting bitcoin mining operations that leverage hydroelectric power in the area.

The Chinese government acknowledged the rampant flooding in the areas surrounding Sichuan’s various rivers, which has caused several deaths and injuries. State-run media outlet China Daily reported that the infrastructure damage resulting from the floods has had a significant impact on the region’s power grid.

Damage to Bitcoin Mining Facilities

Chinese cryptocurrency mining pool Poolin provided a stark portrayal of the impact the flooding has had on its output as well. Posting footage of the devastation on Twitter, Poolin demonstrated that many of the area’s cryptocurrency mining facilities, which take advantage of the relatively cheap hydroelectric power available there, have been totally destroyed by floods.

For several years now, China has held a disproportionate share of the world’s bitcoin mining power, with more than 70 percent of mining taking place in the nation as of 2018. A frequent rebuttal to the claim that bitcoin mining is an unsustainable use of energy is that the vast majority of mining electricity comes from renewable energy sources, particularly hydroelectric power. Sophisticated renewable mining operations have cropped up worldwide, but China still currently holds the lion’s share of the market. As such, substantial flooding in Sichuan province has been a significant setback in the nation’s, and therefore the world’s, total bitcoin output.

Disruption in Bitcoin Mining?

Although data published by mining pool BTC.com has shown a clear drop in the overall hashrate of Bitcoin since the flooding began, this is a complicated issue. The profitability of mining operations in China is such that the demand for mining equipment far outstrips supply, and as a result miners have taken on a wide array of tactics to maximize profitability.

In particular, Sichuan province is a hotbed of mining operations, but only during its rainy season. Interviews with personnel working at illegal mining operations in Sichuan have found that the epicenter of hydroelectric mining moves around the interior regions of China from summer to winter, keeping pace with the cheapest and most stable sources of hydroelectric energy. Although the destruction of valuable mining equipment itself, as depicted in Poolin’s videos, can hinder company relocations to other river basins, the fact remains that the infrastructure for such seasonal movements is likely already in place.

In other words, the devastation that this flooding has unleashed upon a major bitcoin mining location may not have much of a permanent impact on the overall supply chain. Even as the threat of increasing floods grows due to climate change, miners in China have been looking to diversify the centers of their mining operations, setting up shop in other countries such as Iran to take advantage of other sources of cheap energy.

Additionally, even if flooding in the region did cause a permanent disruption to Sichuan’s bitcoin output, other nations worldwide have also set up a variety of extremely sophisticated renewable mining facilities.

Renewable energy solutions such as these will be critical to the development of a sustainable future for Bitcoin as an economic project, especially if environmental instability such as this is able to disrupt the production of renewable energy itself.